Despite a drop in the UK’s pace of inflation, the Bank of England has raised the Base Rate yet again, bringing it up to a 15-year high of 5.25 percent.
While this move is said to bring “more pain” to borrowers, with mortgage holders on variable rates due to see another hike in repayment costs, savings accounts should typically benefit – provided that banks and building societies pass on the rate rises.
Lily Megson, policy director at My Pension Expert, said: “Sadly, despite the Bank of England pushing the Base Rate higher and higher in its fight against inflation, many high street banks are continuing to fail to pass on these advantages to their customers.
“This is deeply disappointing, adding to the financial strain on savers in the midst of a cost-of-living crisis that is far from over.”
However, as of August 1, the Financial Conduct Authority (FCA) has enforced new rules that require savings providers to review or justify interest rates that don’t reflect a Base Rate rise, meaning deals could now become a lot more competitive.
Ms Megson added: “The Financial Conduct Authority is right to scrutinise the banks for not passing on better rates, and action cannot come fast enough.
“Britons need all the support they can get in the current economic climate, which is making financial planning very challenging.”
Mohsin Rashid, CEO of ZIPZERO, added: “A core tenet in the Bank of England’s strategy – encouraging people to put money aside – is being criminally undermined by many banks which are failing to pass on rising rates to their customers.
“No increase in the Base Rate is worthwhile if consumers don’t see value in saving, though it is encouraging to see the regulators finally cracking down on this.”
However, Ms Megson said banks’ interest rates are just “one area” where change is needed. She explained: “It is important that customers feel supported and empowered to make more informed decisions. Making information regarding savings or investment options available would be a step in the right direction. So too would be improving access to affordable advice.”
For Chieu Cao, the CEO of financial wellbeing platform Mintago, another interest rate hike, is “another sucker punch that will leave millions reeling”.
He said: “We can be sure employers and managers are seeing the headlines about those drowning in skyrocketing debt and repayments, but how many have actually taken action to support their employees through these challenging times?
However, Ms Megson said banks’ interest rates are just “one area” where change is needed. She explained: “It is important that customers feel supported and empowered to make more informed decisions. Making information regarding savings or investment options available would be a step in the right direction. So too would be improving access to affordable advice.”
For Chieu Cao, the CEO of financial wellbeing platform Mintago, another interest rate hike, is “another sucker punch that will leave millions reeling”.
He said: “We can be sure employers and managers are seeing the headlines about those drowning in skyrocketing debt and repayments, but how many have actually taken action to support their employees through these challenging times?
“In fact, how many even know which of their staff are struggling with issues such as higher interest rates and the cost of living crisis?
“Unfortunately, too many businesses are not having the right conversations with staff – talking about financial stress remains a workplace taboo, and people’s well-being is being harmed as a result. Now is the time to step up.”
He added that there is “no use pointing the finger of blame at the Bank of England, Government, banks or anyone else”, and that business leaders need to do more to support employees.
